National energy Efficiency Master Plan - KeTTHA For Comments... · National Energy Efficiency Action Plan Ministry of Energy, Green Technologies and Water, 2014 3 List of Figures

FINAL DRAFT

NATIONAL ENERGY EFFICIENCY

ACTION PLAN

Draft Final Report

January 2014

National Energy Efficiency Action Plan

Ministry of Energy, Green Technologies and Water, 2014 2

Table of Contents

1. Executive Summary ............................................................................................. 4 2. Background .......................................................................................................... 8

2.1 The Institutional Setup and Regulatory Framework on Energy Efficiency .... 9 2.2 Past Experiences on Energy Efficiency Promotional Initiatives ................... 10

2.3 Identified Barriers to Energy Efficiency ....................................................... 12

3. A Plan for Energy Efficiency ............................................................................ 14 3.1 Energy efficiency Potentials .......................................................................... 14

3.2 The Guiding Principles of the Plan ............................................................... 17 3.3 The Thrusts of the Plan ................................................................................. 18 3.4 Policy Direction of the Malaysia Energy Efficiency Action Plan ................ 19 3.5 Targets and Impact of Malaysia Energy Efficiency Action Plan .................. 20

3.6 Costs and Benefits ......................................................................................... 22 3.7 Strategic actions ............................................................................................ 23 3.8 Key Initiatives ............................................................................................... 24 3.9 Malaysia Energy Efficiency Action Plan Programmes ................................ 25

4. Strategic Actions ................................................................................................ 28 4.1 Action 1: Establish A Malaysia Energy Efficiency Action Plan Project Team 28

4.2 Action 2: Funding for Energy Efficiency ...................................................... 30 4.3 Action 3: Government Led Initiatives ........................................................... 31

4.4 Action 4: Capacity Building .......................................................................... 31 4.5 Action 5: Research and Development ........................................................... 31

5. Key Initiatives ..................................................................................................... 33 5.1 Overview of Key Initiatives and Programmes .............................................. 33 5.2 Key initiative 1: Rating and Labelling of appliances ................................... 35

5.3 Key initiative 2: Minimum Energy Performance Standards (MEPS) ........... 37 5.4 Key initiative 3: Energy Audits in Buildings and Industries ........................ 39 5.5 Key initiative 4: Targeted Rebate and Support Programmes ........................ 41

5.6 Key initiative 5: Energy Efficient Building Design ...................................... 42

6. Monitoring of the Malaysia Energy ................................................................. 43 Efficiency Action Plan Progress ............................................................................... 43

6.1 Energy Efficiency Monitoring Framework .................................................. 44

6.2 Reporting the Malaysia Energy Efficiency Action Plan Implementation

Progress .................................................................................................................... 46

7. Annex 1: NEEAP Summary Table ................................................................... 47



List of Figures

Figure 1: Economic growth rates versus Energy growth rates. ................................... 14 Figure 2: Final energy intensity vs Industrial energy intensity. ................................... 15 Figure 3: The energy savings and demand reduction by the Malaysia Energy

Efficiency Action Plan ................................................................................................. 21 Figure 4: Linkages of target and impact with major stakeholders ............................... 22 Figure 5: The organisational Structure of NEEMP Project Team ............................... 29

Figure.6: The Malaysia Energy Efficiency Action Plan Public Budget Breakdowns . 30

List of Tables

Table 1: The cash-flow of Malaysia Efficiency Action Plan ....................................... 23 Table 2: Programmes for the Industrial Sector ............................................................ 26

Table 3: Programmes for energy-efficient buildings ................................................... 26 Table 4: Programmes for energy-efficient equipment ................................................. 27 Table 5: Key Initiatives ................................................................................................ 34



1. Executive Summary

Malaysia is a developing country where its growing population and expansion of

economic activities especially in the manufacturing sector have been the major drivers

for the increasing demand for energy supply. Historically, the nation’s energy demand

growth rates were higher than the growth rates of its Gross Domestic Products (GDP).

The energy demand growth, especially the demand growth for electricity, was

accelerated by the industrialisation process in the past two decades. The imbalance

ratio between energy demand and GDP is indicative of the more energy-intensive

economic activities driving the growth. In this regard, the need to promote efficient-

use of energy in the country has become clear. However, the effort requires sound

energy efficiency policies supported with good strategies and implementable

programmes.

Since 2000, Malaysia’s energy intensity ratios have been always over 1.0. The ratios

were simple indicators to express the level of energy efficiency from the techno-

economics perspectives and values over 1.0 indicate the inefficient use of energy. The

level of energy efficiency provides a compelling reason for Malaysia to improve its

energy use. Energy efficiency offers an effective and efficient energy policy

instrument to address the energy supply security issue as well as energy-related

environmental issue in the country. At the same time, energy efficiency is also one of

the ways that will lead the country to a sustainable energy path.

Energy efficiency improvement at demand-side is a crucial parts of the energy sector

development as the demand dictates the energy supply and fuel consumption. Savings

on the demand side will reduce the energy losses due to distribution and transmission

of power, losses in power generation plants, and the energy use associated with

extraction and transportation of fuels. In energy terms, saving one unit of energy in

the demand side will save 3-4 units of primary fuels. In addition, investments in

energy supply facilities such as power plants and grid can be deferred or postponed.

In this regard, the Malaysia Energy Efficiency Action Plan is focused to tackle issues

pertaining to energy supply by managing demand efficiently. The Plan prescribes a

path towards improving energy efficiency by pursuing the implementation of

measures that are considered as “harvesting the low hanging fruits”, as they are viable

for the nation as well as the end users. The plan is built upon the experiences and

knowledge from past programmes and projects, which were implemented by various



institutions and agencies, but was lacking in terms of a coherent framework to ensure

sustainability in the longer term.

The lessons from the past experiences have given the understanding on the main

barriers that impeded the progress and success of past energy efficiency improvement

efforts in Malaysia. The barriers can be categorised as:

Low energy prices;

Lack of finance for energy efficiency;

Lack of overall national plan for Energy Efficiency;

Lack of champion to drive Energy Efficiency; and

Lack of consistency in embarking on energy efficiency.

Therefore, the Malaysia Energy Efficiency Action Plan presents the instruments for a

successful implementation of energy efficiency strategies in the country for a period

of 10 years which will address and mitigate those barriers.

The Malaysia Energy Efficiency Action Plan presents a strategy for a well-

coordinated and cost-effective implementation of energy efficiency measures in the

industrial, commercial and residential sectors, which will lead to reduced energy

consumption and economic savings for the consumers and the nation. However, it

must be borne in mind that the Malaysia Energy Efficiency Action Plan is only

confine to electricity usage and does not cover the other aspects of the energy sector.

The aim of the plan is to promote energy efficiency in order to meet the following

policy direction:

”Promote energy efficiency to ensure productive use of

energy and minimise waste in order to contribute to

sustainable development and increased welfare and

competitiveness.”

In meeting the policy direction, the Malaysia Energy Efficiency Action Plan will be

supported by 5 main thrusts that will drive the nation towards a sustainable energy

path:

Thrust 1: Establish an overall long-term national plan for energy efficiency;

Thrust 2: Strengthen Implementation Capacity to Promote Energy Efficiency;



Thrust 3: Create adequate and sustainable funding mechanism for energy efficiency;

Thrust 4: Implement Energy Efficiency Programmes; and

Thrust 5: Enable commercial finance institutions to support energy efficiency.

The above five thrusts will help eliminate the existing barriers and ensure that energy

consumers in the targeted sectors will be encouraged to adopt and adapt energy

efficiency as a way of life and reap the benefits that energy efficiency could provide.

The Malaysia Energy Efficiency Action Plan outlines strategic actions that are needed

for an effective and efficient implementation of energy efficiency programmes. The

actions are:

Action 1: Establish a Malaysia Energy Efficiency Action Plan Project Team;

Action 2: Funding for energy efficiency;

Action 3: Government led initiatives;

Action 4: Capacity Building; and

Action 5: Research, development and innovation.

The Malaysia Energy Efficiency Action Plan contains 17 specific energy efficiency

programmes covering three sectors to be implemented over a 10 years period. The

programmes can be grouped into 5 key initiatives related to the design of the

programmes. i.e:-

Initiative 1: Rating and labelling of appliances;

Initiative 2: Minimum Energy Performance Standards (MEPS);

Initiative 3: Energy Audits and Management in Buildings and Industries;

Initiative 4: Targeted “Kick Start Promotion Bonus” and support programmes.

Initiative 5: Energy Efficient Building Design.

The target of Malaysia Energy Efficiency Action Plan is to save electricity and reduce

electricity demand growth. The effective and efficient implementation of the Malaysia

Energy Efficiency Action Plan supported with sufficient resources will be able to save

50,594 GWh of electricity over the plan period against a business-as-usual (BAU)

scenario. The corresponding electricity demand growth reduction at the end of the

plan is 6.0%. The electricity savings will eventually lead to a reduction in peak

demand and the need to build new power plants in future. In other words, Malaysia

Energy Efficiency Action Plan’s achievement will improve the electricity load profile

by better management of peaking load in the power system. A straight-forward

calculation of peak demand reduction from the Malaysia Energy Efficiency Action



Plan implementation will result in a total capacity saving of 2,268 MW. The fuel

savings derived from the Malaysia Energy Efficiency Action Plan will also lead to

less environmental impact and reduction in greenhouse gas emissions. The total

reduction of greenhouse gas emission over the plan is projected to be 40 million

tonnes CO2 equivalent. A total reduction of 96 million tonnes of CO2 equivalent will be

achieved over the lifetime of the energy-efficient technologies adopted and adapted

from the plan implementation.

The effective and efficient implementation of the Malaysia Energy Efficiency Action

Plan’s programmes requires an average governmental budget allocation of RM 104

million annually. The budget will cover the cost to administer and incentivise the

Malaysia Energy Efficiency Action Plan’s programmes. The public expenditure on

the Malaysia Energy Efficiency Action Plan, a total of RM 1,040 million, will be

leveraged by the private sector investments. A total of RM 9,518 million private

sector investments will be induced over the plan. From this investment amount, the

largest share will be spent on the adaptation of energy-efficient technologies.

The public and private expenditure on Malaysia Energy Efficiency Action Plan

programmes, amounting to a total of RM 10,557 million, will result in a total direct

monetary saving benefit of RM 14,627 million. The direct monetary benefit is the

value of total electricity saved by the Malaysia Energy Efficiency Action Plan,

calculated based on the current electricity tariff. The other indirect benefits, i.e.

capacity savings and greenhouse gas reduction are not included in the direct monetary

benefit.

The cost-benefit ratio of the Malaysia Energy Efficiency Action Plan, which is

calculated by dividing the direct monetary benefit with the public and private cost, is

1.4. In other words, every RM 1 spent on the Malaysia Energy Efficiency Action

Plan’s programmes will result in RM 1.40, while the cost-benefit ratio based on the

lifetime savings of energy-efficient technologies adopted and adapted during the

Malaysia Energy Efficiency Action Plan is 3.2.



2. Background

Malaysia is a progressive developing country. Its economic and social development

has been growing fast with energy as one of the main inputs to drive them. Malaysia’s

final energy consumption had increased from 13 million toe in 1990 to about 41

million toe in 2010, reflecting an annual average growth rate of 6%. The electricity

consumption during the period grew at an annual average growth rate of 9% to reach

104,519 GWh. At the same time, Malaysia’s GDP grew at an annual average growth

rate of 6%. Malaysia is determined to maintain its economic growth over the next

decade, but the growth in its energy consumption must be managed to ensure the

productivity and competitiveness of its economy.

In the process to accelerate its economic and social development, supported by its

current position as a net energy exporter, Malaysia provides subsidies on energy-use

for various levels of users. The energy subsidies amount offered to various energy

users in the country has been growing from year to year, corresponding with the

volatility of global energy prices and growing demand for energy. The subsidies

amount has reached a worrisome level that the government expenditure capacity has

been stretched beyond its ability and has taken the share of other developmental

budget allocation. This situation has prompted the Malaysian Government to review

its policies related to energy subsidies and to take action to manage energy subsidies

with proper mitigation actions. In this regard, energy efficiency offers a sound

solution to mitigate the effects of the gradual removal of energy subsidies.

The need to drive its economic growth while maintaining productivity and

competitiveness and also the compelling need to rationalise its energy subsidies have

made energy efficiency as one of the key energy policy instrument for Malaysia.

Energy efficiency will benefit the whole society as it encourages reduced overall costs

for energy for the consumers and reduced subsidy payments from the government.

These savings can be directed to more useful purposes in households, industries and

other sectors of the society and increase the welfare of the nation. At the same time,

Malaysia also can enhance its security of energy supply through a cost-effective

approach by implementing effective energy-efficiency strategies and programs.

Energy efficiency will help to reduce the burden of energy costs for the consumers but

at the same time will ensure that the energy quality and quantity derived from the

energy used are maintained. In addition energy efficiency will serve as part of the

nation’s strategy on climate change and the reduction in the emission of greenhouse

gasses.



2.1 The Institutional Setup and Regulatory Framework on Energy Efficiency

The key agencies involved to promote energy efficiency in Malaysia are the Energy

Unit of Economic Planning Unit (EPU) of the Prime Minister’s Office, the Ministry

of Energy, Green Technology and Water (MEGTW) and the Energy Commission

(EC). The role of MEGTW is to formulate and implement energy efficiency policy, in

coordination with the EPU. The EPU’s main role is to allocate sufficient resources for

the implementation of energy efficiency programmes. The EC, established under the

Energy Commission Act 2001, is the regulatory agency for the electricity and the gas

supply industry at the reticulation stage. The Commission’s main tasks are to regulate

the electricity and gas supply industry at the reticulation stage from the technical,

safety and economic aspects. EC also advises the Energy, Green Technology and

Water Minister on all matters related to electricity and tariffs including energy

efficiency promotion.

In promoting energy efficiency, MEGTW had enacted a number of legal instruments.

The main legal instrument on energy efficiency promotion is the Electricity Supply

Act (Amendment) 2001 or known as Act A1116. The Act empowers the Energy,

Green Technology and Water Minister under the Section 23A, 23B and 23C of the

Act to promote efficient use of electricity in the country. Deriving from the Act,

MEGTW issued the Efficient Management of Electrical Energy Regulation 2008.

Under that regulation, all installations that consume or generate 3 million kWh or

more of electricity over a period of six months will be required to engage an electrical

energy manager who shall, among others, be responsible to analyse the total

consumption of electrical energy, to advise on the development and implementation

of measures to ensure efficient management of electrical energy as well as to monitor

the effectiveness of the measures taken. The EC is empowered to enforce the Energy

Efficiency Regulations.

In 1989, the Ministry of Energy, Telecommunications and Posts, the predecessor of

MEGTW introduced the Guidelines for Energy Efficiency in Buildings. The

Guidelines was developed as a Malaysian Standard, i.e MS 1525 – Code of Practice

on Energy Efficiency and Use of Renewable Energy for Non-Residential Buildings”

in 2001. The code has been used as a guide in designing energy-efficient buildings in

the country. The code was revised in 2007 to incorporate the latest technological

developments. In 2012, the promotion of energy efficiency in new commercial

buildings was made mandatory by the amendment of the Uniform Building By-Laws

(UBBL). Section 38A of the UBBL requires new or renovated non-residential



buildings with air-conditioned space exceeding 4,000 square metres to be designed to

meet the Overall Thermal Transfer Value (OTTV) and the Roof Thermal Transfer

Value (RTTV) of MS 1525. The section also requires those buildings to be provided

with an Energy Management System (EMS).

The latest regulatory instrument to promote energy efficiency improvement is the

Electricity Regulations (Amendment) 2013. The regulation has been amended to

allow the implementation of Minimum Energy Performance Standards (MEPS) on

selected electrical appliances and lighting. Under the new regulation, refrigerators,

air-conditioners, televisions, fans and lamps (Fluorescent, Compact Fluorescent, Light

Emitting Diode and Incandescent) that enter the Malaysian market or are sold to

consumers must meet the minimum energy performance standards as prescribed in the

regulation. Furthermore, information related to MEPS of those products must be made

available to consumers by labeling. Labeling of appliances covered by MEPS will

became a mandatory requirement. The regulation will pave the way for the phasing-

out of inefficient electrical appliances and lighting.

2.2 Past Experiences on Energy Efficiency Promotional Initiatives

In the past 10 years, a number of energy efficiency initiatives had been undertaken by

the Malaysian Government. Some of these initiatives were supported by the United

Nations Development Programme (UNDP), Japan External Trade Organisation

(JETRO), Energy Conservation Centre Japan (ECCJ) and the Danish International

Development Agency (DANIDA). Those initiatives have led to capacity building in

various aspects of energy efficiency in the country. It has also increased the awareness

on energy efficiency among stakeholders, the private sector and energy users at large.

The initiatives also paved the way for the enactment and formulation of energy

efficiency regulatory instruments for some selected industries in the country.

Some of those key initiatives are:

1) Malaysian Green Technology Corporation, formerly Malaysian Energy Centre. A

number of projects have been implemented in the areas of energy efficiency and

renewable energy. Some of the most significant are:

a. Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) –

was a cooperative project between the Malaysian Government and UNDP

with the aim of promoting energy efficiency within the industrial sector.

The project focussed on energy auditing of industries, demonstration



projects, rating of high efficient equipment and increasing the awareness

among industrial consumers on energy efficiency.

b. Integrated Resource Planning – was a 4-year DANIDA funded project

aimed at providing capacity building on methodologies for effective

energy planning and forecasting, taking both supply and demand side

initiatives into account.

c. GEO Building – the building where the present Greentech Malaysia is

located is a demonstration building that had been designed with low

energy features. The energy consumption of the building was designed to

be 50kWh/m2

– significantly lower than the average of 200 kWh/m2 of

typical office buildings. Furthermore, installation of photovoltaic systems

brings the net electricity consumption down to about 35kWh/m2.

2) Centre for Education and Training in Energy Efficiency and Renewable Energy

(CETREE) is a centre located in the campus of University of Science, Penang. At

the initial stage, CETREE’s establishment was assisted by DANIDA. CETREE’s

focus is to increase awareness on energy efficiency and renewable energy among

school children and students. The Centre has developed curricula for primary and

secondary schools and assisted universities in incorporating energy efficiency in

their teaching courses. Furthermore, the centre organises events for schools on

energy efficiency and renewable energy and their exhibition busses visits schools

all over Peninsular Malaysia. The centre is funded by MEGTW for its operational

and developmental expenses.

3) Fiscal Incentives for Energy Efficiency was introduced under the government

financial budget in 2001. The aim is to promote energy efficiency projects and

equipment by providing tax incentives. The tax incentives are in the form of

waiver of import duty and sales tax on energy efficient equipment and accelerated

capital allowances or pioneer status for investment in energy efficient

technologies and projects. These incentives were enhanced over the years.

4) The Green Technology Finance Scheme (GTFS) was launched in January 2010,

with a fund of RM 1.5 Billion to support investments in green technology projects,

which, among others, include energy efficiency. The fund provides a 2% subsidy

to the interest rates offered by commercial banks and a credit guarantee support

for the loan capital. Under the 2013 budget, the Government increased the amount

of interest subsidy by RM2.0 billion, making the total amount of green financing

made available by the Government to RM3.5 billion.



5) Sustainability Achieved via Energy Efficiency Program or SAVE was a program

designed under the Economic Transformation Program (ETP) of the Malaysian

Government in July 2011. The program was aimed to provide cash rebates for the

purchase of energy-efficient refrigerators, air-conditioners and chillers. A total of

RM 45 million was allocated under the program for the rebates and its

promotional campaign activities throughout the country. The budget had covered

the purchases of as many as 100,000 units of refrigerators, 65,000 units of air-

conditioners and 72,000RT capacity of energy efficient chillers for eligible

domestic consumers and private companies. SAVE has helped to create a market

for energy-efficient appliances and market penetration of those products

6) Energy Performance Contracting (EPC) is an initiative started in Jan 2013 by the

Malaysian Government to promote energy efficiency in government buildings.

Under the EPC concept, government buildings are allowed to engage energy

services companies (ESCO) to improve energy efficiency. The cost of investment

to implement energy efficiency improvement will be provided by the ESCO,

while the government buildings are allowed to pay the cost of investment by the

ESCO from the savings made from the improvement efforts. The initiative will

help create an ESCO industry in Malaysia as well as ease the government’s

monetary burden on building energy bills.

The above initiatives have all contributed to create a strong platform for

implementation of energy efficiency, as institutions and human resources have been

developed and basic awareness in all parts of society has been spread.

2.3 Identified Barriers to Energy Efficiency

Although various initiatives have been undertaken to promote energy efficiency

improvements, the outcome of the initiatives on the nation’s energy supply and

demand is unclear. The initiatives have been spread and there has been a lack of

synergy among the various projects, as well as a proper plan for the continuation of

the activities after the project period. In this regard, a number of key barriers have

been indentified that prevented a wide-spread adoption of energy efficient practises.

They are:

1) Low energy prices – The electricity and fuel prices have been kept below the

actual cost of energy generation due to fuel subsidies. The prices are not

reflecting the real cost of production and supply of energy. The low energy



prices prevent energy efficiency as the consumers are less concerned about the

energy costs. Furthermore, energy efficiency investments are not made as the

returns in terms of energy savings are small due to the low energy prices.

2) Lack of finance for energy efficiency – dedicated finance for energy efficiency

from commercial lending institutions has been difficult to obtain, as the banks

have not built sufficient capacity to deal with energy efficiency project

evaluation and project finance schemes. Loans for energy efficiency projects

are normally given based on collaterals from the applying companies and not

based on the project feasibility. Similarly, there are no loan schemes for

energy efficiency for individual consumers and the finance institutions will

normally recommend traditional loan schemes such as e.g. term loans, credit

card loans, if an individual wishes to purchase energy-efficient appliances.

3) Lack of overall national plan for Energy Efficiency – Energy efficiency has

been a part of the Malaysian Development Plans, but there has not been any

underlying road map or action plan for the implementation of energy

efficiency. The activities are, therefore, driven by individual short-term

projects, without a clear coordination among the activities and a clear medium

term and long term objective.

4) Lack of champion to drive Energy Efficiency – Energy efficiency has been

implemented by various agencies and institutions. But there has not been a

clear authority in charge of ensuring that energy efficiency plays a central role

in the nation’s energy planning. The planning is still very much based on

demand forecast and supply planning, without taking into account energy

efficiency and demand side management.

5) Lack of consistency in embarking on the energy efficiency – most of the effort

on promoting energy efficiency has been based on projects with limited time

frame. Those projects have contributed to developing capacity in various

institutions and a few energy efficiency initiatives have been implemented.

But the activities have slowed down or been discontinued after the project

funding is ended. The lack of a continuous annual government budget for

energy efficiency activities has created a situation where activities are project

based which tends to lead to too many starts and stops in the activities.



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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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3. A Plan for Energy Efficiency

3.1 Energy efficiency Potentials

Energy plays an important role in Malaysia’s economic development. In 2010,

Malaysia used 41 million toe of energy for its economic development and the well-

being of its people. The usage of electricity as one of the final energy components was

104,519 GWh or 9 million toe. Figure 1 shows the economic growth rates pattern

versus the energy growth rates patterns which are represented by the final energy

demand and electricity demand. The energy demand growth tended to move in

tandem with the economic growth rate. The pattern has proved that Malaysia’s

economic development was depending heavily on energy as one of the important

factor inputs.

Figure 1: Economic growth rates versus Energy growth rates.

According to the National Energy Balance Report 2010, the transport sector of

Malaysia was the largest energy user. It accounted for 41% of the final energy

demand in 2010. The industrial sector was at the second rank with the share of 31%,

followed by the commercial and residential sectors with a share of 17%. The

increasing demand for transport energy in Malaysia is driven by passenger

transportation sub-sector. Factors such as energy subsidies, rapid urbanisation and



0

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60

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Final Energy Intensity Industrial Energy Intensity

growing private vehicle ownership are driving the increase in demand. Malaysia is

taking concerted efforts to manage its transport energy demand by improving its mass

transit system, promoting the market penetration of efficient hybrid cars by tax

exemption and having continuous awareness dissemination programmes. However,

energy efficiency improvement on the transport sector is not covered in this Plan and

will be addressed separately by the Government.

Malaysia’s economic development is supported strongly by the industrial sector.

Figure 2 shows the relationship between the final energy intensity and industrial

energy intensity. The values of both intensities show a strong relationship and they

moved in tandem. The reduction in the both intensity values beginning from 2008

was caused by the global financial crisis. The reduction in demand for industrial

outputs resulting from the crisis affected the Malaysia’s industrial outputs as well. The

reduction of energy intensities, which is often related to improvement of energy

efficiency, in this case was caused by industrial activity reduction and to some extent

by structural changes. The improvement is caused by non-energy components of

energy intensity.

Figure 2: Final energy intensity vs Industrial energy intensity.

The potential of energy efficiency in the industrial sector is significant. The energy

audits conducted during the Malaysian Industrial Energy Efficiency Improvement

Project (MIEEIP) (about 50 audits for the eight industry subsectors) have found that

potential energy savings in major industries in Malaysia can be from as low as 2%

(for a glass company which was already very efficient) to 52% (for wood companies).



The 2% savings, however, could bring about high savings as the annual energy

consumption was high. The highest potential energy saved had been found in the

cement industry, which at 32.7% of the annual energy consumption of almost 15

million GJ could yield a savings of 4.9 million GJ. The focus on industrial energy

efficiency improvement should be on the adaption of energy-efficient equipment and

processes, better management of energy at plant and organisational levels and human

capacity development.

The commercial and residential sector’s energy use was small when compared to the

other two sectors. But the sector has significant contribution to Malaysia’s economy.

The sector’s energy use is mainly in buildings, which is for space cooling and to

operate equipment in the buildings. Managing building energy use in Malaysia is

relatively easier compared to buildings located in seasonal climates. In this regard, the

buildings’ energy needs are quite stable and easily predictable. However, the major

challenge in promoting energy efficiency in Malaysia is the enforcement of regulatory

instrument due to the lack of human capital and relatively low tariffs for commercial

buildings to embark on energy efficiency measures.

Malaysia’s commercial buildings, other than specific function buildings, on average

have a Building Energy Index (BEI) of around 200 to 300 kWh/m2/year. However, the

lesson learned from the showcase office building of the Ministry of Energy, Green

Technology and Water (MEGTW) or known as Low Energy Office (LEO) proved

that the BEI values for Malaysian office building could be lowered up to 100

kWh/m2/year, with an additional capital investment of 5% against the total capital cost.

The additional capital cost had a pay-back period of 8 years. In this regard, the

improvement of energy efficiency in buildings could bring significant savings in

electricity consumption and other benefits.

The energy efficiency improvements for the residential sectors will be focused on

appliances. The market penetration of the energy-efficient appliances can be enhanced

by providing incentives to the buyers. Regulatory measures to ban the importation and

sale of inefficient appliances through the Minimum Energy Performance Standards

(MEPS), has been introduced. Furthermore information on energy-efficient products

to consumers will be widened by mandatory labelling for appliances under the MEPS.



3.2 The Guiding Principles of the Plan

A plan to promote national-level energy efficiency requires a number of guiding

principles. The principles will ensure that the promotion of energy efficiency with

various levels of energy users will not result in any adverse effects. The guiding

principles are as follows:

Cost Effectiveness: The planned initiatives have been assessed in terms of cost

effectiveness. The indicator used is the Benefit-Cost Ratio (BCR) where the ratio of

monetary energy savings over the cost is evaluated for both government and private

sectors. Only initiatives with a BCR above 1 are considered, and a high BCR is

preferred.

Improved competitiveness and welfare: As the BCR of the private sector is evaluated

and must be above 1, this means the end-users will be saving money on their energy

expenditure as a result of implementing the initiatives. Only initiatives that can

maintain or increase competitiveness and welfare are chosen, mainly by encouraging

more efficient practises and more efficient technologies.

Focus on low-hanging fruits: Initiatives with high savings potential and low cost will

be targetted. This means that both highly feasible initiatives are preferred i.e.

technologies and projects with a high savings, as well as initiatives with a large reach

where the saving per installation is more modest, but the number of installations is

high. This is to ensure that the overall energy saving for the nation is high.

Create incentives to enable and encourage end-users to implement energy efficiency:

Necessary incentives are given to facilitate a market transformation towards energy

efficiency technologies. It is expected that the support is only given to kick-start the

transformation and the market forces will take over by reducing the gap in

incremental cost for energy efficiency.

Balanced approach to sectors, end-user groups and energy services: Although the

overriding planning principle is cost effectiveness, priority will be given to ensure that

the lower income groups and small- and medium enterprises are included in the

initiatives. These groups might not have the same potential and impact as other groups,

but they are important to be included due to their size in numbers of installations.



Create a domestic market for energy efficient technologies: Energy efficient

technologies will be made available in the domestic market, by creating a market push

through incentives and regulation for suppliers, as well as a market pull from the

consumers by energy efficiency initiatives. Furthermore, local manufacturers of

energy consuming technologies will be encouraged to produce and provide energy-

efficient and green technologies for the domestic market as well as the increasing the

size of the international market for such technologies.

Ensure comfort is not compromised: The initiatives shall not have any adverse impact

on the current and future comfort levels expected by the consumers. Therefore energy

efficiency initiatives that provide the same or better service with lower energy

consumption are chosen.

3.3 The Thrusts of the Plan

The ineffective implementation of energy efficiency strategies and programmes in

Malaysia is owed to some indentified barriers. The barriers need to be removed for

effective and efficient implementation of the energy efficiency policy. The plans to

promote effective implementation of the energy efficiency policy by removing the

barriers depend on 5 thrusts, which are:

Thrust 1: Establish an overall long-term national plan for energy efficiency.

This plan will create the road map for energy efficiency for the next 10 years. This

will allow a coordinated effort to improve energy efficiency in all segments of

society and ensure a continuous implementation of initiatives. The plan will be

named as The Malaysia Energy Efficiency Action Plan;

Thrust 2: Strengthen Implementation Capacity to Promote Energy Efficiency.

A dedicated project team need to be established in MEGTW to implement the plan.

Oversee the initiatives to be undertaken and track the progress;

Thrust 3: Create adequate and sustainable funding mechanism for energy

efficiency. Although energy efficiency is a viable option in the longer term, there

is a need to ensure that funding is available for the promotion and implementation

of energy efficiency initiatives as well as for funding the project team to

administer the Plan. The necessary funding is envisaged to be used for kick

starting e.g. through incentive rebates, the implementation of energy efficiency



initiatives and mitigating the economic barriers to a wide spread uptake of energy

efficiency;

Thrust 4: Implement Energy Efficiency Programmes. The core of this national

action plan is the implementation of specific energy efficiency programmes that

will reduce the energy consumption by the target consumers. Therefore, the Plan

comprises a catalogues of programmes which are to be pursued during the Plan

period; and

Thrust 5: Enable commercial finance institutions to support energy efficiency.

As it is intended to ensure that energy efficiency is a way of life for the society, it

is important that the consumers have access to finance to choose and invest in

energy efficient technologies and projects. Therefore, the finance institutions are

envisaged to play a major role in accepting and providing finance to energy

efficient technologies and energy efficiency improvement projects.

The above 5 thrusts will together ensure that energy efficiency plays an important role

in society during the next Ten-Years. The thrust will reach out to all segments of

society and ensure that all energy consumers are encouraged to implement energy

efficiency and reap the benefits of the savings that energy efficiency will provide.

3.4 Policy Direction of the Malaysia Energy Efficiency Action Plan

The energy efficiency policy must ensure that the outputs of energy-use in the form of

economic values and well-being of users are not sacrificed. Energy efficiency

implementation should provide the users with an increased economic productivity,

reduced resources use and improved comfort in the longer term. Thus, the energy

efficiency policy shall be designed in a manner that the long term economic benefits

are higher than the initial cost and that the service that the technologies provides is the

same or higher than the low-efficient technologies.

In short, the underlying policy direction for the Malaysia Energy Efficiency Action

Plan is formulated as;

”Promote Energy Efficiency to ensure productive use of energy and minimise waste in order to contribute to sustainable development and increased welfare and competitiveness.”



The policy direction includes the following key principles:

Promote: The implementation of energy efficiency is to promote the concept that

consumers have to be more energy efficient, by mainly voluntary participation. Only

minor parts of the action plan will be based on mandatory or compulsory initiatives

and only in cases where it is determined to be for the common good.

Productive use: The plan is not to reduce the productivity of the society and reduce

the comfort level. On the contrary the aim is to increase productivity, but in a manner

where the energy usage is controlled and not higher than necessary.

Minimise waste: Waste is defined as both waste of fuel resources, waste products

from energy generation such as pollution and greenhouse gasses as well as waste of

money, from overspending on electricity and fuels.

Sustainable development: This is defined as meeting our current needs in a manner,

that the needs of future generation are not compromised. The central point for the

development of the society is that economic growth does not lead to constraints for

growth in the future.

Increased welfare and competitiveness: Energy efficiency shall lead to an increase in

the comfort and productivity for all parts of society. By reducing the use of energy,

this will ensure that the expenditure for energy is kept at a low level, which will

cushion consumers from any future increases in energy prices.

3.5 Targets and Impact of Malaysia Ten-Year Energy Efficiency Action Plan

The focus of the Malaysia Energy Efficiency Action Plan strategies and programmes

is on electricity use in the industrial, commercial and residential sectors. Therefore,

the target of the Malaysia Energy Efficiency Action Plan is to save electricity and

reduce the electricity demand growth. The effective and efficient implementation of

the Malaysia Energy Efficiency Action Plan, supported with sufficient resources, will

be able to save 50,594 GWh of electricity over the plan period against a business-as-

usual (BAU) scenario. The corresponding electricity demand growth reduction at the

end of the plan is 6.0%. The Malaysia Energy Efficiency Action Plan programmes

will continue to produce savings beyond the plan period, owing to the lifetime of the



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0

1000

2000

3000

4000

5000

6000

7000

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

GW

h

Residential Commercial Industrial % of Demand Reduction

energy-efficient technologies adopted and adapted during the plan period. The

cumulative lifetime savings of the technologies is estimated at about 121,178 GWh of

electricity. Figure 3 shows the electricity savings and electricity demand reduction by

the Malaysia Energy Efficiency Action Plan.

Figure 3: The energy savings and demand reduction by the Malaysia Energy

Efficiency Action Plan

The electricity savings will eventually lead to a reduction in peak demand and the

need to build new power plants in the future. In other words, the Malaysia Energy

Efficiency Action Plan achievement will improve the electricity load profile by better

management of peaking load in the power system. A straight-forward calculation of

peak demand reduction from the Malaysia Energy Efficiency Action Plan

implementation indicates a total capacity saving of 2,268 MW. This indirect benefit

will save the capital expenditure and the operating cost needed for the construction of

new power plants. At the same, Malaysia’s energy supply security position will be

enhanced by easing the constraints on the energy supply infrastructure. The fuel

savings derived from the Malaysia Energy Efficiency Action Plan will also lead to

less environmental impact and reduction in greenhouse gas emissions. The total

reduction of greenhouse gas emissions over the plan period is projected to be 40

million tonnes of CO2 equivalent. A total reduction of 96 million tonnes of CO2 equivalent

will be achieved over the lifetime of the energy-efficient technologies that are adopted



• Residential-Energy

efficient appliances

• Commercial-Energy efficient buildings

• Industry- Energy efficient

technologies and process

• Government-Leadership by example

Reduce Energy Bill

Improve Economic

Productivity

Improve Quality of Life

Reduce Environmental

Effects

and adapted from the plan implementation. The significant linkages of the target and

impact of the Malaysia Energy Efficiency Action Plan with major stakeholders are

shown in Figure 4.

Figure 4: Linkages of target and impact with major stakeholders

3.6 Costs and Benefits

The effective and efficient implementation of the Malaysia Energy Efficiency Action

Plan programmes requires an average governmental budget allocation of RM 104

million annually. The budget will cover the cost to administer and incentivise the

Malaysia Energy Efficiency Action Plan programmes. The public expenditure on the

Malaysia Energy Efficiency Action Plan, a total of RM 1,040 million, will be

leveraged by private sector investments. A total of RM 9,518 million private

investments will be induced over the plan. From this investment amount, the largest

share will be spent on the adaptation of energy-efficient technologies.

The public and private expenditure on the Malaysia Energy Efficiency Action Plan

programmes, amounting to a total of RM 10,557 million, will result in a total direct

monetary saving of RM 14,627 million. The direct monetary benefit is the value of

total electricity saved by the Malaysia Energy Efficiency Action Plan, calculated



based on the current electricity tariff. The other indirect benefits, i.e. capacity savings

and greenhouse gas reductions are not included in the direct monetary benefit.

The cost-benefit ratio of the Malaysia Energy Efficiency Action Plan, which is

calculated by dividing the direct monetary benefit with the public and private cost, is

1.4. In other word, every RM 1 spent on the Malaysia Energy Efficiency Action Plan

programmes will result in a benefit of RM 1.40. The cost-benefit ratio based on the

lifetime savings of energy-efficient technologies adopted and adapted during the

Malaysia Energy Efficiency Action Plan is 3.2. The overall “cash-flow” during the

plan period is summarized in Table 1. The cash-flow shows continuous gain from the

sixth year of the Malaysia Energy Efficiency Action Plan implementation. The reason

for such pattern is because the energy savings from the early years of the plan are

accrued in the later years of the plan.

Table 1: The cash-flow of Malaysia Energy Efficiency Action Plan

RM Mill. Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Total

Public Funding

46 74 94 97 110 111 112 113 114 116 988

Admin Cost 4 4 5 5 5 5 6 6 6 6 52

Private Investment

112 294 486 617 1,065 1,101 1,119 1,138 1,157 1,177 988

Benefits 78 249 505 804 1,176 1,562 1,955 2,355 2,764 3,180 14,627

+/- -84 -124 -80 84 -5 345 718 1,099 1,486 1,881 4,069

3.7 Strategic actions The implementation of the Malaysia Energy Efficiency Action Plan will be

accommodated by the existing legal and regulatory framework of energy efficiency in

the country. In doing so, the Malaysia Energy Efficiency Action Plan will strengthen

the foundation for the promotion and implementation of energy efficiency initiatives

in the country through these five strategic actions:

Action 1: Establishing Malaysia Energy Efficiency Action Plan Project Team,

which will have the capacity and capability to implement effectively and efficiently

the Malaysia Energy Efficiency Action Plan’s programmes to achieve the planned

targets. The team must also be able to track the Malaysia Energy Efficiency Action



Plan’s progress with relevant methods and tools as well as update the progress in a

periodic manner to stakeholders.

Action 2: Funding for energy efficiency, which will provide the budget for

incentives for energy efficiency initiatives and administrative costs for the project

team as well as related activities undertaken by other institutions.

Action 3: Government led initiatives, will pioneer the energy efficiency

implementation, by getting government institutions and government link companies

(GLC) to set the example for efficient energy use. The government will take the lead

in the implementation of the various initiatives to create a market pull for energy-

efficient green technologies as well as reducing energy wastages.

Action 4: Capacity Building, to educate and train students and professionals in

energy efficiency in order to create a mass of knowledgeable professionals to

implement energy efficiency. The Plan will create awareness on energy conscious

behaviour among the general public and contribute to building human capacity in

government institutions to promote and implement energy efficiency policies and

programmes.

Action 5: Research, development and innovation, to upgrade the understanding of

energy efficiency and to upgrade technologies and processes. The research and

development will be directed towards development of the manufacturing industry to

innovate and transform their products into high efficiency technologies.

3.8 Key Initiatives

Based on these five strategic actions, energy efficiency initiatives will be developed to

promote energy efficiency under the Malaysia Energy Efficiency Action Plan. The

initiatives can be grouped into 5 key initiatives:

Key initiative 1: Rating and labelling of appliances. Labelling of appliances is an

effective tool to inform consumers about the energy consumption of the goods. Labels

have already been applied for refrigerators, fans, air conditioners and TV’s. At present

the 5-star labelling is voluntary. It is planned that the labelling shall be mandatory for

selected appliances and shall be applied to more appliances in the future.



Key initiative 2: Minimum Energy Performance Standards (MEPS). The MEPS

will set the minimum energy performance for energy consuming equipment to be

sold in the market. By introducing MEPS to equipment, it can ensure that low

efficient technologies are not dumped in the market. Currently, MEPS has been

introduced for refrigerators, fans, air conditioners, televisions and lamps. MEPS will

be extended for more equipment under the Malaysia Energy Efficiency Action Plan.

Key initiative 3: Energy Audits and Energy Management in Buildings and

Industries. Energy audits are consultancy services for identification of energy saving

potentials in facilities. It has been demonstrated in earlier studies that savings of 10%

or more are readily available at low or no cost, just by introducing better practices and

reducing leaks etc. Energy audits and energy management will be done in commercial

buildings and industries. As a kick start activity, government facilities will be subject

to energy audits and energy management as well.

Key initiative 4: Targeted rebate and support programmes. Energy efficiency

programmes will be designed and implemented to create a market transformation

towards more energy efficient technologies. Rebate programmes will be made

available to provide support to cover the incremental capital costs for energy efficient

technology e.g. 5-star appliances as compared to average appliances. Rebate schemes

are envisaged to be finite in terms of amount of support to be given and will be phased

out when the market transformation is evident.

Key initiative 5: Energy Efficient Building Design. For new and existing buildings,

programmes will be undertaken to demonstrate energy efficient design features. This

will be in the form of demonstration and show-case projects within various building

types e.g. offices, shopping centres, hotels and dwellings, development of guidelines

and enhancement of the uniform building by-laws.

3.9 Malaysia Energy Efficiency Action Plan Programmes

Malaysia Energy Efficiency Action Plan programmes are targeted on the industrial

sector, buildings and equipments to achieve the Malaysia Energy Efficiency Action

Plan target. The details of the programmes are summarised in Table 2-4 below:-



Table 2: Programmes for the Industrial Sector

Table 3: Programmes for energy-efficient buildings

Programs Plant and Processes Industrial Technologies

High Efficient Motors

Policy Tools Incentives(Soft loans)

Incentives(Grant)

Incentives(Cash rebates)

Awareness Awareness MEPS

Awareness

Public Fund(RM, Mill)

401 295 2

Private Fund(RM, Mill)

2,649 570 174

Electricity Savings(GWh)

22,388 8,625 934

Programmes Govt Buildings Commercial Buildings

New Buildings

Policy Tools Incentives(Financial)

Incentives( Financial & Tax)

Building Codes(MS1525)

Awareness Awareness Awareness


69 127 5


235 589 1,260


2,038 3,914 932



Programmes EE Refrigerators EE Lightings EE Air-Conditioners

EE Fans

Policy Tools MEPS MEPS MEPS MEPS

Labeling Labeling Labeling Labeling

Incentives (Cash Rebates)

Incentives (Cash Rebates)

Incentives (Cash

Rebates)

Awareness Awareness Awareness Awareness


50 2 19 17


1,118 127 1,294 751


2,079 3,056 5,983 645

Table 4: Programmes for energy-efficient equipment



4. Strategic Actions

This chapter outlines the content of the five strategic actions, which form the base for

the Malaysia Energy Efficiency Action Plan. All of these are crucial for the proper

implementation of the key initiatives and in achieving the desired impact of the

interventions.

4.1 Action 1: Establish A Malaysia Ten-Year Energy Efficiency Action Plan Project Team

The first action under the Malaysia Energy Efficiency Action Plan is to establish a

project team to administer and implement Malaysia Energy Efficiency Action Plan

programmes. The Malaysia Energy Efficiency Action Plan Project Team will be

instrumental in implementing the energy efficiency programmes under the Malaysia

Energy Efficiency Action Plan. The team also will play a coordinating role with other

relevant agencies on the Malaysia Energy Efficiency Action Plan implementation.

The Malaysia Energy Efficiency Action Plan project team will be established by

MEGTW. The main duties of the project team are to:

Carry out effective and efficient implementation of the Malaysia Energy

Efficiency Action Plan programmes;

Promote awareness on energy efficiency to various energy users ;

Disseminate information and knowledge through campaigns and programmes

on energy efficiency;

Monitor and evaluate the Malaysia Energy Efficiency Action Plan

programmes continuously;

Prepare progress report on the Malaysia Energy Efficiency Action Plan

periodically; and

Keep and maintain a database with necessary information and data on energy

use and energy efficiency gathered from the Malaysia Energy Efficiency

Action Plan.

The organisational structure of the Malaysia Energy Efficiency Action Plan project

team is shown in Figure 5. The Project Team will be headed by a Project Leader. The

Project Leader will be assisted by three sectoral Programme Managers. The

Programme Managers’ main duty is to manage the activities within their sectors. The

corporate functions related to finance and accounting will be managed by a finance



officer. The officer will manage the funds for the operation of the team as well as fund

allocations and disbursement to the Malaysia Energy Efficiency Action Plan

programmes.

The data management and monitoring unit function is to compile energy data and

provide data analyses. The function includes the monitoring of the progress of the

Malaysia Energy Efficiency Action Plan with a set of relevant indicators. The

effective implementation of the Malaysia Energy Efficiency Action Plan is dependent

on how well its progress is monitored. Corrective steps on the Malaysia Energy

Efficiency Action Plan progress will be based on the monitoring report. In this regard,

the Unit will report to the Project Team Leader.

A major part of the communication and data management will be using information

technology and information should to a great extent be made available on-line. The

Malaysia Energy Efficiency Action Plan Project will have a web-portal with all

relevant information regarding its activities in order to ensure easy access to

information and material by the end-users. Internal information shall be made

available on an intranet, where all relevant background information as well as budget

and fund information is kept up-to-date. The dissemination and sharing of information

using information technologies will be done by the Data Management and Monitoring

Unit.

Figure 5: The organisational Structure of NEEAP Project Team

Project Leader

Industrial Programme

Manager

Programme Officer

Programme Officer

Buildings Programme

Manager

Programme Officer

Programme Officer

Equipment Programme

Manager

Programme Officer

Programme Officer

Data Management

& Monitoring Unit

Finance

& Accounting



0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

RM

, M

illio

n

Annual Budget Components

Campaign /Awareness Incentives/Fund Administrative

4.2 Action 2: Funding for Energy Efficiency

The necessary funding for the implementation of the Malaysia Energy Efficiency

Action Plan will be limited to seed capital that will enable the private sector to invest

in energy efficiency technologies and projects. Funding is budgeted for two main

purposes: a) Administration of the plan including design of programmes and

campaigns, and b) Incentives as catalyst to implement energy efficiency technologies

and projects for the private sector.

The amount of funding necessary for the effective implementation of the Malaysia

Energy Efficiency Action Plan is about RM 104 million per year or RM 1,040 million

over the plan period. A total of RM 52 million from the public budget is needed for

the overall administration of the plan implementation. The funding from the

government will induce the private sector to invest in energy efficiency technologies

and projects in a magnitude of RM 9.5 billion. Figure 6 provides the breakdowns of

plan annual budget breakdowns. The funding and investment will lead to energy

savings with a monetary value of RM 14.6 billion, based on fixed 2010 prices and

tariffs. The public funding for the plan implementation will be sourced from the

Federal Government and the Malaysia Electricity Supply Industry Trust Account

(MESITA).

Figure 6: The Malaysia Energy Efficiency Action Plan Public Budget Breakdown



4.3 Action 3: Government Led Initiatives

Although the major impact from energy efficiency is envisaged to be from the private

sector, the role of government institutions and government-linked companies are

crucial for the successful introduction of energy efficiency initiatives. The

government can, through circulars, direct its institutions to practice energy efficiency

in its operations.

The government shall therefore be the pioneer in implementing internal policies for

purchase of energy efficient 5-star energy labelled appliances and equipment,

implement energy management and conduct energy audits in large facilities. This will

create a market transformation towards energy-efficient technologies and practices, as

suppliers will be encouraged to make energy efficient technologies and services

available in the market. This effort by the government will enable the private sector to

follow suit in a faster pace as the government will have been the ice-breaker in the

market.

4.4 Action 4: Capacity Building Capacity building of individuals and organisations in energy efficiency will be part of

the implementation of the energy efficiency initiatives, whenever training and

education in specific areas and practices is required, for example in energy auditing

practices and energy management. In addition, it is important that the educational

institutions are producing candidates with relevant knowledge and qualifications in

energy efficiency such as engineers, economists and technical people. Educational

institutions will be encouraged to enhance the resources for energy efficiency training

of students to meet the expected demand for such qualified personnel in the future.

Similarly, professional institutions will be encouraged to upgrade and train their

faculty members in energy efficiency by introducing courses and workshops for

engineers, architects, economists, accountants etc.

4.5 Action 5: Research and Development

Existing research institutions such as universities and private entities e.g. Sirim

Berhad, manufacturers etc., will be encouraged to enhance research in the field of

energy efficiency. This can be in areas of developing energy-efficient technologies as

well as studying the impact of various energy efficiency practices and behaviours. As



the energy efficiency initiatives are targeting market transformation towards energy-

efficient technologies, it is critical that local manufacturers upgrade and develop their

products to meet the highest degree of energy efficiency and play a major role in the

market. This will not only enable them to market their products in Malaysia, but also

improve the possibilities of exporting their technologies as energy efficiency is an

important parameter for buyers in the developing and developed world. This is also in

line with the government’s policy on developing a knowledge based economy with

the development of more intelligent and advanced, green technologies.



5. Key Initiatives

The identified key energy efficiency initiatives presented in the section 2.4 is further

elaborated in this section in terms of programmes to be implemented under the

National Energy Efficiency Plan over a period of 10 years. The programmes are

designed to ensure attention to the energy efficiency measures that are introduced for

the consumers and provide the necessary incentives to kick-start the introduction of

new technologies and processes.

The programmes will mainly be funded by the private sector, as the capital

investments in energy-efficient measures are to be made by the consumers. The

programmes will encourage and enable the consumers to implement the measures by

promoting technologies and processes and removing market barriers such as

additional costs for energy-efficient technologies. As the market transformation

towards new energy efficient technologies takes place and more energy efficient

technologies become available the additional costs will be lowered, and this reduces

or eliminates the need for incentives.

5.1 Overview of Key Initiatives and Programmes

The key initiatives to be introduced in the plan period are the following:

Key initiative 1: Rating and Labelling of appliances

Key initiative 2: Minimum Energy Performance Standards (MEPS)

Key initiative 3: Energy Audits and Energy Management in Buildings and

Industries

Key initiative 4: Targetted rebate and support programmes

Key initiative 5: Energy Efficient Building Design

Table 5 details the key initiatives and the programmes under each key initiative

together with expected electricity savings that each of the measures will result in.



Table 5: Key Initiatives

Key Initiative Description Programme Savings

in 10 years (GWh)

Energy Rating and Labelling

- Star energy rating of appliances and mandatory labelling.

- Promotion of 5-star appliance

- Rebates to purchase 5-star rated appliances

Refrigerators 2,079

Air-conditioners 5,983

Ceiling and Stand Fans 645

Minimum Energy

Performance Standards

(MEPS

- Promotion of MEPS

Compact Fluorescent Lamps

3,056

High Efficiency Motors 934

Energy Audits in Buildings and

Industries

- Support for energy audits in commercial, industrial and government facilities

- Implementation of low cost measures and process optimisation

Large Commercial Facilities

1,565

Large Industrial Facilities 8,384

Large Government Facilities

927

Medium Commercial Facilities

306

Medium Industrial Facilities

539

Energy Management in

Buildings and Industries

- Mandatory energy management systems audits in commercial, industrial and government facilities

- Implementation of no cost measures and process optimisation


1,363

Large Industrial Facilities 15,937


1,112


681


1,201

Rebate scheme for standard

measures

- Rebates to prescribed technologies and programmes

Chillers, HVAC variable speed drives, pumps,

lighting, insulation etc. 4,950

Energy Efficient Building Design

- Demonstration projects of energy efficiency in new buildings

Commercial buildings 932



5.2 Key initiative 1: Rating and Labelling of appliances

Energy rating and labelling has been a key in the market transformation of household

appliances towards more energy-efficient models. It has been successfully applied

worldwide in Europe, USA, Japan, Australia, Thailand etc. for more than a decade

and has resulted in significant improvements in the energy efficiency of the

technologies. Energy labels allow the consumer to be informed about the energy

consumption of the appliances they wish to purchase. As the purchase decision for

electrical decision should be made on the basis of life cycle cost i.e. both the initial

purchase cost and the operational cost for electricity, it is necessary to have the

electricity consumption displayed on the products, so that the consumer can evaluate

the cost and compare both the purchase price and operational cost of various models

on display in the shops.

Labelling of the energy performance or energy

rating can be applied to all types of energy

consuming equipment.

In the Plan period, step will be taken to

introduce mandatory appliance rating and

labelling for the following selected equipment:

Refrigerators

Air-conditioners

Ceiling and stand fans

The reason for selecting these three types of appliances is that the Energy

Commission has already prepared the energy rating standards for these and a



voluntary label has been introduced in the market for refrigerators. The labelling can

be expanded to more appliances during the plan period, as experiences with the

market transformation by labelling the above types of appliances are evaluated.

Programme: 5-star Refrigerators

A programme to promote 5-star refrigerators is proposed. The programme will be

based on promoting the existing 5-star rating and label for refrigerators, which was

introduced on a voluntary basis in 2005. The 5-star rated refrigerators are available in

the market, but their market share is still considered to be low, compared to

conventional refrigerators, which are rated as 3-star. The 5-star rated refrigerators are

more than 25% more energy-efficient than the average 3-star refrigerators. As nearly

all households in Malaysia own a refrigerator and this is often the appliance that

consumes the most electricity, if the household is without air-conditioners, then there

lies a high potential for energy savings by introducing more energy-efficient

refrigerators.

The programme will be targeting the sale of new refrigerators to transform the market

into more efficient models. In order to ensure that 5-star models are available in the

market, a rebate will be given to encourage buyers to choose the 5-star model over

models with lower efficiency. The rebate will offset the incremental cost of the more

efficient models and create a higher demand for 5-star refrigerators. In order to meet

the market demand it is expected that the vendors and importers will supply more 5-

star models to the market. The campaign to provide rebates will be during short

campaign periods to create a significant market pull over a short time period.

Programme: 5-Star Air-conditioners

Air-conditioners are used in mainly residential

and commercial sectors. The sale of air-

conditioners is growing as the economy grows

and more and more consumers can afford to buy

air-conditioners. For modern homes it is not

unusual to have 3-4 air-conditioners installed. In

order to ensure that the consumers are choosing

energy-efficient models, it is planned to introduce a mandatory energy label for air-

conditioners. The Energy Commission has prepared a star rating scheme for air-

conditioners and 5-star air-conditioners are at least 10% more efficient that

conventional models.



The programme will be designed to promote 5-star air conditioners by mandatory

labelling and a rebate will be provided for the purchase of 5-star models and to offset

the incremental cost. The rebate will create a market pull and transform the market to

make more 5-star models available in the stores. The rebate will only be introduced in

short campaign periods.

Programme: 5-Star Ceiling and Stand Fans

Ceiling, stand and table fans are present in almost

all homes and many homes have 3-4 fans. The

Energy Commission has created an energy rating

standard for fans and 5-star fans are at least10%

more efficient than conventional fans. By

introducing mandatory rating and labelling, the

buyers will be kept informed about the energy

efficiency of the fans in the market.

The promotion will be a combination of advertisements as well as a rebate scheme,

where rebates are used to encourage buyers to choose 5-star fans and to offset the

incremental cost. The rebate will only be given over short periods to create a

significant market pull that will spur the vendors to make 5-star fans available.

5.3 Key initiative 2: Minimum Energy Performance Standards (MEPS)

Minimum energy performance standards or MEPS prescribe the minimum energy

efficiency that products shall meet in order to be sold in the market. Similar to

standards for product safety, MEPS is a way to protect the consumers from products

that have low energy performance. MEPS can be applied to most technologies.

However it should only be applied when there is certainty that alternatives are

available and these alternatives are affordable to the consumers.

Programme: Phasing Out Incandescent Light Bulbs

Incandescent light bulbs are widely used,

although compact fluorescent lamps (CFL) are

available in the market. The reason for the

continued presence of incandescent bulbs is

mainly because of the fact that the purchase

price for incandescent is about 1/10 of the price



of CFL’s. However, incandescent bulbs

consume about 5 times more electricity than

CFLs and only last about 1000 hours, whereas

CFL will have a lifetime of at least 6000 hours.

The extra cost of CFLs is normally paid back in

about 1000 hours, so this energy efficiency

technology is highly feasible.

The programme will phase out incandescent light bulbs by prohibiting their sales in

the market. By the middle of 2014, the sale and import of all incandescent light bulbs

for which there exist a CFL as an alternative will be prohibited. Until the ban becomes

effective, campaigns on energy-efficient lighting will be made to increase awareness

on the benefits of CFLs. This will allow the consumers and vendors to prepare for the

transition.

Phasing-out of incandescent light bulbs started in EU in 2009 and it is expected that

almost all incandescent will be off the market by 2012. Also, other countries such as

Australia, Canada and Philippines among others have announced bans on

incandescent bulbs.

Programme: Phasing Out Inefficient Motors

Motors are widely used in industrial processes and

machinery, and can either be purchased as stand-

alone motors or integrated in equipment. The

Energy Commission has adopted the international

CEMEP standard for energy rating of motors, which

classifies motors in three classes according to the

energy efficiency. The most efficient class is EFF1,

followed by EFF2 and EFF3 as the lowest class. The

CEMEP scheme is to be changed after the adoption

of the latest IEC standard for motor performance

classifies the most energy efficient motors as IE3, whereas IE1 is the low efficient

class. EU is currently in the process of implementing minimum performance

standards for motors, which is expected to be minimum class IE2.

A mandatory minimum energy performance standard for motors will be based on the

CEMEP/IEC standard and will define the minimum performance for motors to be

minimum IE2/EFF2. This minimum standard is planned to be effective in 2015 and in



the period 2014, awareness and promotion campaigns will be carried out to inform the

industries about the benefits of energy efficiency motors (IE3) motors and the phasing

out of low efficient types (IE1). Similarly importers and manufacturers of motors and

equipment with integrated motors will be targeted for promotion and awareness

campaigns.

5.4 Key initiative 3: Energy Audits in Buildings and Industries

Energy audits include the mapping of a facility’s energy consumption in order to

identify areas where energy efficiency can be implemented. Energy audits are done

periodically.

Often the energy audit will reveal no-cost measures such as energy wastages from

equipment that is left on, but not being used or improvements in the processes that

leads to energy savings. The outcome of an energy audit is recommendations on

energy efficiency measures to be implemented and an evaluation of their costs and

benefits. Energy audits are typically done by external consultants with expertise in

energy auditing methods and the particular type of facility.

Programmes: Energy Audits in Commercial, Industrial and Government Facilities

The energy audit programmes to be

implemented will target the following types

of facilities:




Large Industrial Facilities


The programmes will offer free energy audits to the facilities on the condition that the

facility owner will confirm that recommended energy efficiency measures will be

implemented for an amount equal to or higher than the cost of the energy audit.

The number of energy audits to be conducted will depend heavily on the number of

trained auditors. T here is therefore a need to support the training of energy auditors,

so that the resource base can be increased and the number of audits can be intensified.



The total requirement for auditors will gradually increase to 500 full-time auditors in

2020 and the work load will be maintained until the end of the plan.

The energy savings that can be expected from energy audits are at least 5% of the

total energy consumption of the installations concerned. Most of these savings are

derived from eliminating energy wastages and accelerated change of in-efficient

equipment which is beyond their economical and technical lifetime. Larger energy

efficiency projects are not considered in the savings calculations but will most likely

also take place in many of the facilities which will significantly increase the savings.

Programmes: Energy Management in Commercial, Industrial and Government Facilities

Energy management is the day-to-day

monitoring and management of the energy

consumption in a facility. Programmes will

be initiated to mandate facilities to

implement energy management by

appointing an energy manager and prepare

energy management reports. The Efficient Management of Electrical Energy

Regulations 2008 already prescribes that large facilities need to implement energy

management and this will be expanded to cover medium sized facilities from 2015

onwards. Furthermore, the energy management system requirements will be improved

to ensure that energy efficiency measures and practices are being continuously

implemented and tracked.

For large government facilities, energy management will be compulsory by circular.

This will allow the government to show leadership in energy efficiency as well as in

implementing cost reduction measures. A part of the energy management will be

procurement procedures ensuring that the government facilities are purchasing 5-star

rated equipment.

The campaign for introducing the mandatory energy management will focus on

providing guidelines and training to the energy managers to increase awareness of

energy efficiency options available to their facilities. The energy management in

facilities will also indirectly support other programmes in the national energy-

efficiency action plan such as the energy audit programmes and energy rating and



labelling programmes as it is expected that the facilities with energy management will

demand energy-efficient technologies.

5.5 Key initiative 4: Targeted Rebate and Support Programmes

The targeted rebate and support programmes are part of the

campaigns for introducing 5-star rated appliances and conducting

energy audits. In addition, it is planned to initiate a funding

scheme that will provide support to a number of prescribed energy

efficiency activities, so-called Standard Measures. Standard

Measures are technologies or projects that are pre-evaluated for

their energy savings and cost-benefit and the necessary amount of

support is assessed based on the payback period for the measures

and the incremental investment costs compared to conventional

technologies.

Standard Measures have been successfully applied in Denmark

and Thailand and allows effective procedures for promotion of

energy-efficient technologies and implementation. The typical

size of support is about 30% of the investment cost, which is sufficient to encourage

facility owners to implement the technology.

The type of standard measures that can be introduced are:

Energy Efficient Chillers and heat pumps;

Insulation of pipes and equipments;

Air-to-air heat exchanger;

Efficient lighting and luminaries;

Variable speed drives for pumps and compressors

High efficient motors

Voltage regulators

The list above shows examples of Standard Measures that have been promoted in

Thailand and Denmark. A general feasibility study shall be made for each of them to

determine the support amount and energy savings. This study will form the basis for

the application procedures, which are standardised in order to ease the application for

the support.



Individual projects can also be considered. For these a case by case assessment is

conducted in order to evaluate the feasibility of the project and the amount of support

to be given. Standard measures will be introduced in 2014 on a trial basis for a few

selected measures and about 300 applications. In the subsequent years the Standard

Measures will be further expanded and support will be given to about 1500

application from 2018 and onwards.

5.6 Key initiative 5: Energy Efficient Building Design

The commercial sector consumes about one-third of all electricity in the country and a

large share of this is used in buildings for cooling, ventilation, lighting, appliances etc.

The future increase in energy consumption in the commercial sector will come from

new buildings. Therefore, a programme to ensure that these new buildings are

designed and built with consideration of energy efficiency is of high importance.

Surveys have shown that new buildings are consuming energy around 200-250

kWh/m2, which could be reduced to about 135 kWh/m

2 by applying the Code of

Practice MS1525:2007 on energy efficiency and use of renewable energy for non-

residential buildings.

At present the MS 1525:2007 is a voluntary

code of practice and it is therefore purely up to

the developers to use it. As many buildings are

occupied by tenants or other owners rather than

by the developers, the building design often does

not take energy efficiency into consideration as

this might increase the building cost and the

savings will not benefit the developer.

The programme is planned to

demonstrate energy efficient building

design by supporting 30 buildings in the

period from 2014 to 2016 and create

awareness among developers and

building owners and provide showcases

on energy efficiency features in building

design.



6. Monitoring of the Malaysia Energy Efficiency Action Plan Progress

The implementation of the Malaysia Energy Efficiency Action Plan requires effective

monitoring by the Government. As the MEGTW overseas the implementation of the

Malaysia Energy Efficiency Action Plan and the the Malaysia Energy Efficiency

Action Plan Project Team executes the plan it is critical that the progress of

implementation is monitored periodically by the Data Management and Monitoring

Unit of the Malaysia Energy Efficiency Action Plan Project Team. In this regard, the

annual planning and resources allocation for the Malaysia Energy Efficiency Action

Plan is prepared with clear indicators for the expected annual implementation target.

One of the key factors to promote energy efficiency improvement successfully is to

understand how energy is being used, and ways in which energy can be used more

efficiently. By understanding them, not only the energy efficiency improvement can

be done with great success but it will also help to monitor and evaluate the

performances in terms of energy efficiency improvements. To gain such an insight, an

appreciation of the many complexities which make up economic and social activities,

and the ways in which these interact is required.

Currently, the method used to monitor Malaysia’s energy efficiency status is by

judging energy intensity. The energy intensity value is a ratio between energy and

economic values. Normally, the energy intensity is calculated by dividing Total

Primary Energy Supply (TPES) by Gross Domestic Product (GDP). For Malaysia, our

Energy Intensity (EI) in the year 2010 was 140 (toe/million, RM at 2000 prices).

Since 1990, the EI value was growing at an average rate of 0.8 % annually. This

implies that Malaysia’s energy efficiency status is decreasing despite the continuous

efforts taken to promote energy efficiency in the country.

Various strategies and actions have been taken to improve the status of energy

efficiency in the country. However, the performances of those efforts to improve the

state of energy supply and use in the country have remained unknown. The

justification of their performances by EI is unfair because the EI value is not only

influenced by energy factors but also by non-energy factors such as economic

structure, energy quality and activities. In fact EI is not a proper indicator to measure

the performance of energy efficiency.



6.1 Energy Efficiency Monitoring Framework

The Malaysia Energy Efficiency Action Plan is aimed to address the challenges and

barriers surrounding the efforts to promote energy efficiency improvements. The

earlier draft of this document was reviewed by a group of energy efficiency experts

from Asia Pacific Economic Cooperation (APEC) under the APEC Peer Review on

the Energy Efficiency Policy (PREE). In its review report on the Malaysia Energy

Efficiency Action Plan, PREE has made strong recommendations for the Malaysia

Energy Efficiency Action Plan to have a monitoring framework. The recommendations

made by PREE are:

1) Develop a set of energy efficiency indicators for economic sectors and sub-

sectors;

2) Carry out factorisation techniques on the indicators to remove the non-energy

factors as well as to create economy-wide indicators by aggregation;

3) Define the data needs, energy data, economic data, according to the energy

efficiency indicators’ needs;

4) Create a legal mechanism to empower the government to obtain energy end-

use data from all energy users in the economy as well as to spread the burden

of data collection among the government agencies;

5) Develop an analytical energy efficiency monitoring framework. The analytical

framework should help to be a communication tool for policy makers and

energy users in the effort to improve energy efficiency; and

6) Publish, periodically, energy efficiency monitoring reports and disseminate the

reports to stakeholders

The need to establish a monitoring framework based on indicators is clearly

highlighted by the PREE report. Without sound monitoring, the effectiveness of

energy efficiency improvement strategies and actions in Malaysia will remain elusive.

The monitoring framework should ensure that the goals of energy efficiency policy

are measureable, clearly define the data needs for monitoring and evaluation, measure

the real achievements against planned and provide feedbacks for correction if there

are deficiencies in performances.



6.1.1 Energy Efficiency Indicators

One of the main challenges in executing energy efficiency strategies and action plans

effectively and efficiently is to quantify the achievements from the available data. To

make this happen, one of the useful tools in energy efficiency implementation is the

energy efficiency indicators. In general, an energy efficiency indicator is a ratio to

measure energy use against a unit of output. In the industrial sector, for example, the

measures are normally energy use per Ringgit of production or energy per physical

unit of production. In the building sector, energy intensity is expressed in terms of

energy per square metre of floor space and in the transport sector; energy intensity is

measured in terms of energy use per passenger-km or energy use per ton-km.

At sub-sectors level, energy intensity is defined as the ratio of energy use per unit of

activity. Thus, if Eit is the energy use for sub-sector i and Ait is the activity for sub-

sector i, the sub-sector intensity is defined as:-

it

itit

A

EI

When two or more sub-sectors for which the activity is measured on a common basis

are aggregated, the aggregate intensity for sector, It is defined as:-

it

it

tA

EI

The computation of energy intensity for the economy or sector’s level is informative,

but it does not tell the underlying elements that drive the energy use. The underlying

measures of energy efficiency can be derived from aggregate energy use and energy

intensity by factorisation.

6.1.2 Index Factorisation of Energy Efficiency Indicators

Index factorisation of energy efficiency indicators is a method to separate out the

effects of non-energy efficiency changes such as shifts in sectoral production

(structural effect), output levels (activity), and energy intensity (technological

improvement). Mathematically, it can be shown that:

Index (Energy Intensity) = Index (Activity) x Index (Structure) x Index (Technical)



Where, Activity index shows the changes in the level of activity, Structure index

shows the effect of changing economic structure and Technical index shows the effect

of technological improvement.

Index factorisation analysis has been adopted internationally as one of the best tool to

study the impacts of economic structure, activities and energy technologies on energy

use. For energy efficiency index factorisation, the arithmetic mean Divisia index

method has been the often used index factorisation. The Divisia index is a weighted

sum of logarithmic growth rates, where the weights are the components’ share in the

total value, given in the form of a line integral. It allows a decomposition of the

percentage change in energy use into separate changes in total activity, economic

structure, and energy intensity at the sub-sectors level.

6.2 Reporting the Malaysia Energy Efficiency Action Plan Implementation Progress

The Malaysia Energy Efficiency Action Plan Project Team needs to report the

progress of the Malaysia Energy Efficiency Action Plan implementation as one of the

Malaysia Energy Efficiency Action Plan’s main monitoring tools. In the reporting, the

actual progress against the the Malaysia Energy Efficiency Action Plan targets will be

communicated to stakeholders. The report will be in the form of annual reports of the

Malaysia Energy Efficiency Action Plan implementation progress. The report must

contain at least four sections: a section summarising progress towards overall target,

and three sections discussing energy efficiency trends in the industrial, commercial

and residential sectors. The overall section of the annual report should present the

macro indicators graphically. In addition, this section should summarise the results of

the Divisia factorisation. Other sections of the report should delve into more detail

about changes in energy efficiency by sectors. These sections should: graphically

display the lead indicator(s) for each sector; present the results of the sectoral

decomposition analysis; and attempt to explain the observed changes in each of the

sector’s energy efficiency.

FINAL DRAFT

7. Annex 1: MEEAP Summary Table

Item Unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Lifetime

Annual Savings GWh 260 829 1,685 2,678 4,007 5,380 6,778 8,201 9,650 11,125 50,594 121,178

Residential GWh 24 75 195 337 528 735 948 1,167 1,393 1,625 7,028 22,023

Commercial GWh 54 170 354 585 978 1,388 1,804 2,227 2,657 3,095 13,314 38,040

Industrial GWh 172 553 1,064 1,644 2,347 3,062 3,787 4,524 5,273 6,034 28,460 60,228

Cumulative Savings GWh 260 1,089 2,774 5,452 9,460 14,840 21,618 29,819 39,468 50,594 50,594 121,178

Demand Savings MW 42 135 275 437 654 877 1,105 1,337 1,574 1,814 1,814

Capacity Savings MW 53 169 343 546 817 1,097 1,382 1,672 1,967 2,268 2,268

Benefits RM (Million) 78 249 505 804 1,176 1,562 1,955 2,355 2,764 3,180 14,627 33,991

Public Funding RM (Million) 46 74 94 97 110 111 112 113 114 116 988 988

Private Funding RM (Million) 112 294 486 617 1,065 1,101 1,119 1,138 1,157 1,177 9,518 9,518

Administration RM (Million) 4 4 5 5 5 5 6 6 6 6 52 52

Total Payments RM (Million) 162 373 585 719 1,181 1,217 1,237 1,257 1,277 1,299 10,558 10,558

BCR 1.4 3.2

Cash Flow RM (Million) 84- 124- 80- 84 5- 345 718 1,099 1,486 1,881 4,069 23,433

Total fuel savings TJ 2,760 8,734 17,144 26,857 39,923 53,175 66,402 79,606 92,793 105,964 493,358 1,181,654

Gas Savings TJ 1,656 5,241 10,286 16,114 23,954 31,905 39,841 47,764 55,676 63,578 296,015 708,992

Coal Savings TJ 1,104 3,494 6,858 10,743 15,969 21,270 26,561 31,843 37,117 42,386 197,343 472,661

GHG savings ktCO2eq 212 670 1,316 2,062 3,064 4,082 5,097 6,111 7,123 8,134 37,870 90,704

BAU GWh 110,544 117,177 124,207 131,660 139,560 147,933 156,809 166,218 176,191 186,762

NEEMP GWh 110,284 116,348 122,523 128,982 135,552 142,553 150,031 158,017 166,541 175,637

Savings Pct 0.2% 0.7% 1.4% 2.0% 2.9% 3.6% 4.3% 4.9% 5.5% 6.0%

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